Carroll – Federal Court of Appeal confirms that a s. 163(2) penalty can be imposed even where CRA was never misled
The taxpayer’s claim for a loss from a fictitious business was rejected by CRA even before initially assessing his return. In rejecting the taxpayer’s argument “that subsection 163(2) penalties cannot be imposed unless the return as filed has been accepted or there is an amount of income or tax in dispute,” Monaghan J.A. stated:
What is relevant is what the taxes would have been if the return had been accepted as filed, and what the taxes would have been if the false loss were added to the taxable income that was reported in the return filed.
2005-0129131I7 F is similar.
Neal Armstrong. Summary of Carroll v. Canada, 2022 FCA 5 under s. 163(2).